Compare Savings Accounts UK Calculator

Compound Interest Formula:

\[ FV = P \times (1 + \frac{r}{n})^{(n \times t)} \]

Principal (P):

GBP

Annual Interest Rate (r):

decimal

Compounding Periods (n):

Time (t):

years

Future Value (FV):

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1. What is the Compound Interest Formula?

The compound interest formula calculates the future value of an investment or savings account by accounting for interest earned on both the initial principal and accumulated interest over time. This allows for comparison of different UK savings accounts.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ FV = P \times (1 + \frac{r}{n})^{(n \times t)} \]

Where:

\( FV \) — Future value (GBP)
\( P \) — Principal amount (GBP)
\( r \) — Annual interest rate (decimal)
\( n \) — Compounding periods per year (unitless)
\( t \) — Time in years (years)

Explanation: The formula calculates how much your savings will grow based on the interest rate and compounding frequency, allowing you to compare different UK savings accounts.

3. Importance of Comparing Savings Accounts

Details: Comparing savings accounts is crucial for maximizing returns on your money. Different accounts offer varying interest rates and compounding frequencies, which significantly impact your long-term savings growth.

4. Using the Calculator

Tips: Enter principal amount in GBP, annual interest rate as a decimal (e.g., 0.05 for 5%), number of compounding periods per year, and time in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest calculates interest on both principal and accumulated interest, leading to faster growth.

Q2: How often do UK savings accounts typically compound?
A: Most UK savings accounts compound interest annually, though some may compound monthly, quarterly, or daily. Always check the specific account terms.

Q3: Are there tax implications for savings interest in the UK?
A: Yes, you may need to pay tax on savings interest above your Personal Savings Allowance. Basic rate taxpayers can earn £1,000 interest tax-free.

Q4: Should I choose an account with higher interest rate or more frequent compounding?
A: Generally, a higher interest rate has more impact, but more frequent compounding can provide additional benefits, especially over longer periods.

Q5: Are there any risks with savings accounts?
A: UK savings accounts up to £85,000 per institution are protected by the Financial Services Compensation Scheme (FSCS), making them very low risk.